High-yield real estate investment trusts (REITs) often look tempting, but they demand a closer look. A lofty dividend yield can sometimes be a warning sign, masking underlying issues like falling cash flows, rising debt, or structural business weaknesses.
That’s why when a REIT like Allied Properties Real Estate Investment Trust offers a 9.6% annualized dividend yield, investors are right to ask: Is this payout sustainable, or too good to be true?
While Allied has faced its share of headwinds, recent moves suggest the company is actively reshaping its business and taking steps to strengthen its balance sheet—potentially setting the stage for a turnaround.
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A High Yield Backed by Urban Real Estate
Allied focuses on urban workspace properties in key Canadian cities including Toronto, Vancouver, Calgary, Montréal, Edmonton, and Kitchener. Its stock price has fallen roughly 30% over the past two years, even as broader markets rallied. This decline has pushed the share price to $18.72, giving the REIT a market cap of $2.6 billion and a dividend yield approaching 10%, paid monthly.
Notably, the stock has bounced back 25% in the past six months, reflecting a shift in investor sentiment as the REIT begins to stabilize its fundamentals.
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Signs of Operational Stability Emerging
Allied’s Q2 2025 results show a mixed but nuanced picture:
- Rental revenue slipped 1.2% year-over-year to $145 million.
- Operating income declined by 3%.
- However, same-asset net operating income (NOI) rose 1.5%, highlighting some resilience in its core portfolio.
The REIT’s adjusted funds from operations (FFO) payout ratio reached 99%, which may raise sustainability concerns. But adjusted FFO itself has only softened modestly, not deteriorated sharply—an important distinction for income-focused investors.
Strategic Asset Sales and Strong Leasing Momentum
Behind the scenes, Allied has been executing a significant portfolio transformation. In 2024 and 2025, it sold or contracted to sell 28 non-core properties across major cities, targeting proceeds of over $500 million. These funds are being used to reduce debt and concentrate the portfolio in prime urban locations with stronger long-term potential.
Allied has also made notable progress on the leasing front:
- Its 400 West Georgia property in Vancouver is now 96% leased, including a major deal with a global educational institution.
- Netflix has expanded its footprint at the M4 building in Main Alley Campus, taking total occupancy to 90%.
Additionally, in September, Allied raised $450 million through a green bond issuance to refinance construction and term loans—further improving its debt profile.
Why Allied Could Be Worth a Closer Look
Allied’s strategy is centered on high-quality, amenity-rich urban nodes, which remain attractive to blue-chip tenants such as Netflix and Whole Foods Market. By selling weaker assets, improving leasing metrics, and lowering leverage, the REIT aims to bring net debt below 10× adjusted EBITDA, strengthening its financial foundation.
While the near-term payout ratio looks stretched, the company is actively addressing the key factors—debt levels, asset mix, and tenant quality—that will determine its long-term dividend sustainability.
For investors comfortable with some short-term volatility, Allied Properties REIT offers a rare combination: a nearly double-digit yield, exposure to urban real estate, and potential upside if its turnaround strategy gains traction.
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